After nosedive, crashed Sensex recovers by 1, 500 pts(Lead: Sensex)

Following this major crash, trading was halted for an hour. This was the third such instance in the last three years.

Earlier in the day, Finance Minister P Chidmabaram remarks on investment in the stock markets via Participatory Notes (PN) gave the stock exchanges a momentum.

Chidambaram ruled out any ban on investment via PN and gave assurance that the Securities and Exchange Board of India’s (SEBI) proposal on PN’s is to moderate investment coming in from abroad.

Welcoming investment via the PN route, Chidambaram said that he was surprised to see a certain section of the media raising an alarm over the performance of stock markets, adding, there was no need to raise an alarm, and that he expected the initial sense of alarm to “quieten” down by the end of the day.

He went on to say that the move is a culmination of measures discussed between the SEBI, the Reserve Bank of India (RBI) and the Central Government.

Meanwhile, SEBI Chairman M Damodaran has appealed investors not to get carried away by rumours, saying that the proposals on Offshore Derivative Instruments (ODIs) were a well-designed package.

“Investors should see what period they are investing and remain within their set horizon… not be swayed by rumours,” he said.

The SEBI has proposed to tighten the rules for purchase of shares and bonds in Indian companies through the participatory note route. The draft guidelines say foreign institutional investors (FII) and their sub-accounts cannot issue or renew participatory notes with underlying as derivatives with immediate effect. They have to unwind their current position within 18 months.

The Sensex recovered sharply from the day’s low (17,308 points) and touched an intra-day high of 18,841 points - up 1,533 points (8.9 per cent) from the day’s low.

Reliance Energy slumped 7.5 per cent to Rs 1,762. ACC and SBI plunged five per cent each to Rs 1,203 and Rs 1,829, respectively.

BHEL and NTPC tumbled over 4.5 per cent each to Rs 2,283 and Rs 221, respectively.

Mahindra and Mahindra, Tata Steel, HDFC and ONGC slipped around four per cent each to Rs 780, Rs 869, Rs 2,470 and Rs 1,130, respectively.